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Basic Survival Advice For Small Businesses

You may be in some Business, or you may be a local
merchant with 150 employees; whichever, however or whateveryou've got to
know how to keep your business alive during economic recessions.

Anytime the
cash flow in a business, large or small, starts to tighten up, the money management of that business has to be run as a "tight ship."

Some of the things you can do include protecting yourself
from expenditures made on sudden impulse.

We've all bought merchandise or
services we really didn't need simply because we were in the mood, or perhaps
in response to the flamboyancy of the advertising or the persuasiveness of the
salesperson.

Then we sort of "wake up" a couple of days later and
find that we've committed hundreds of dollars of business funds for an item or
service that's not essential to the success of our own business, when really
pressing items had been waiting for those dollars.

If you are incorporated, you can eliminate these
"impulse purchases" by including in your by-laws a clause that
states: "

All purchasing decisions over (a certain amount) are contingent
upon approval by the board of directors.

" This will force you to consider
any "impulse purchases" of considerable cost, and may even be a
reminder in the case of smaller purchases.

If your business is a partnership, you can state, when faced
with a buying decision, that all purchases are contingent upon the approval of
a third party.

In reality, the third party can be your partner, one of your
department heads, or even one of your suppliers.

If your business is a sole proprietorship, you don't have
much to worry about really, because as an individual you have three days to
think about your purchase, and then to nullify that purchase if you think you
don't really need it or can't afford it.

While you may think you cannot afford it, be sure that you
don't "short-change" yourself on professional services.

This would
apply especially during a time of emergency.

Anytime you commit yourself and
move ahead without completely investigating all the angles, and preparing
yourself for all the contingencies that may arise, you're skating on thin ice.

Regardless of the costs involved, it always pays off in the long run to seek
out the advice of experienced professionals before embarking on a plan that
could ruin you.

As an example, an experienced business consultant can fill
you in on the 1244 stock advantages.

Getting eligibility for the 1244 stock
category is a very simple process, but one with tremendous benefits to your
business.

The 1244 stock encourages investors to put equity capital
into your business because in the event of a loss, amounts up to the entire sum
of the investment can be written off in the current year.

Without the
"1244" classification, any losses would have to be spread over
several years, and this, of course, would greatly lessen the attractiveness of
your company's stock.

Any business owner who has not filed the 1244 corporation
has in effect cut himself off from 90 percent of his prospective investors.

Particularly when sales are down, you must be
"hard-nosed" with people trying to sell you luxuries for your
business

When business is booming, you undoubtedly will allow sales people to
show you new models of equipment or a new line of supplies; but when your
business is down, skip the entertaining frills and concentrate on the basics.

Great care must be taken however, to maintain courtesy and allow these sellers
to consider you a friend and call back at another time.

Your company's books should reflect your way of thinking,
and whoever maintains them should generate information according to your
policies.

Thus, you should hire an outside accountant or accounting firm to
figure your return on your investment, as well as the turnover on your accounts
receivable and inventory.

Such an audit or survey should focus in depth on any
or every item within the financial statement that merits special attention.

In
this way, you'll probably uncover any potential financial problems before they
become readily apparent, and certainly before they could get out of hand.

Many small companies set up advisory boards of outside
professional people. These are sometimes known as Power Circles, and once in
place, the business always benefits, especially in times of short operating
capital.

Such an advisory board or power circle should include an attorney, a
certified public accountant, civic club leaders, owners or managers of
businesses similar to yours, and retired executives.

Setting up such an
advisory board of directors is really quite easy, because most people you ask
will be honored to serve.

Once your board is set up, you should meet once a month and
present material for review. Each meeting should be a discussion of your
business problems and an input from your advisers, relative to possible
solutions.

These members of your board of advisers should offer you advice as
well as alternatives, and provide you with objectivity.

No formal decisions
need to be made either at your board meeting, or as a result of them, but you
should be able to gain a great deal from the suggestions you hear.

You will find that most of your customers have the money to
pay at least some of what they owe you immediately.

To keep them current, and
the number of accounts receivable in your files to a minimum, you should call
them on the phone and ask for some kind of explanation why they're falling
behind.

If you develop such a habit as part of your operating procedure, you'll
find your invoices will magically be drawn to the front of their piles of bills
to pay.

While you should maintain a courteous attitude, don't be hesitant, or
too much of a "nice guy" when it comes to collecting money.

Something else that's a very good business practice, but
which few business owners do is to methodically build a credit rating with
their local banks.

Particularly when you have good cash flow, you should borrow
$100 to $1,000 from your banks every 90 days or so.

Simply borrow the money,
and place it in an interest bearing account, and then pay it all back at least
a month or so before it's due.

By doing this, you will increase the borrowing
power of your signature, and strengthen your ability to obtain needed financing
on short notice.

This is a kind of business leverage that will be of great value
to you if or whenever your cash position becomes less favorable.

By all means, join your industry's local and national trade
associations.

Most of these organizations have a wealth of information
available on everything from details on your competitors to average industry
sales figures, new products, services, and trends.

If you are given a membership certificate or wall plaque,
you should display these conspicuously on your office wall.

Customers like to
see such "seals of approval" and feel additional confidence in your
business when they see them.

Still another thing often overlooked: If at all possible,
you should have your spouse work in the business with you for at least three or
four weeks per year.

The important thing is that if for any reason you are not
available to run the business, your spouse will be familiar with certain people
and situations about your business.

These people should include your attorney,
accountant, any consultants or advisers, creditors and your major suppliers.

The long-term advantages of having your spouse work four weeks per year in your
business with you will greatly outweigh the short-term inconvenience.

Many
couples share responsibility and time entirely, which is in most cases even
more desirable.

Whenever you can, and as often as you need it, take
advantage of whatever free business counseling is available.

The Small Business
Administration published many excellent booklets, checklist and brochures on
quite a large variety of businesses.

These publications are available online.

Most universities and many private organizations hold seminars at
minimal cost, and often without charge.

You should also take advantage of the
services offered by your bank and local library.

The important thing about running a small business is to
know the direction in which you're heading; to know on a day-to-day basis your
progress in that very direction; to be aware of what your competitors are doing
and to practice good money management at all times.

All this will prepare you
to recognize potential problems before they arise.

In order to survive with a small business, regardless of the
economic climate, it is essential to surround yourself with smart people, and
practice sound business management at all times.

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